English Original: https://medium.com/@utxostack/p2p-economy-leading-a-blockchain-renaissance-d4b091bf2c44
The entire blockchain industry is currently in a state of emptiness. In the past few years, from ICOs to DeFi, from NFTs to meme coins, there have been few projects that truly provide innovation or value to the public. Most projects are simply chasing short-term profits and speculative opportunities. Many industry veterans are increasingly questioning the current path.
Péter Szilágyi, a core developer of Ethereum, expressed his disappointment with the industry on Twitter a few days ago, pointing out that the blockchain industry is becoming a casino, unrelated to innovation or value creation, let alone mass adoption. He believes that the ideals that blockchain should have are being replaced by the game of "shearing the sheep".
This raises the question: why is this happening? We believe that the reason lies in Ethereum, the blockchain with the largest number of users and applications, which has led the entire industry astray.
Ethereum's Mistake: Putting Everything on the Chain#
Ethereum's biggest mistake is insisting on putting everything on the chain and trying to put all business processes on the blockchain. Even transactions that could have been completed between two individuals offline are forced to rely on the consensus of the entire network.
In Ethereum's worldview, it seems that only fully on-chain applications are considered "legitimate" blockchain applications. Whether it's finance, gaming, or social applications, everything must be on-chain to be considered "correct". When the main chain is congested or resources are insufficient, more chains are created, Layer 2, and even Layer 3. In short, all business processes must be on-chain. And the underlying chain must publish transaction data to upper-level chains or third-party chains to ensure the so-called data availability, and so on.
The result of putting everything on the chain is that the blockchain becomes overwhelmed, unable to keep up with performance, leading to congestion and high transaction fees. This gives the impression that blockchain is slow and expensive, with a poor user experience.
There is an old saying that a product must be ten times better than the existing one to have a chance of success—for example, the iPhone is ten times better than Nokia. However, the user experience and cost of today's blockchain applications are far behind Web2, let alone ten times better. This makes it impossible for blockchain to be widely adopted. The end result is that blockchain can only serve a few people, such as speculators and the gray industry, and inevitably becomes a casino.
Returning to First Principles: What is Blockchain?#
First of all, we need to clarify that blockchain is a tool, a means. A true blockchain application does not need to put all business processes completely on the chain. The key is to meet user needs, including financial freedom, market freedom, content freedom, social freedom, etc.
As we all know, Bitcoin is the origin of blockchain and is widely regarded as the most decentralized blockchain and the most valuable cryptocurrency. However, few people realize that in the Bitcoin whitepaper, Satoshi Nakamoto never mentioned "blockchain" or "decentralization". Instead, he used the term "peer-to-peer (P2P)" and put it directly in the title—"Bitcoin: A Peer-to-Peer Electronic Cash System".
P2P services are a decentralized platform where two individuals can interact directly without the need for a third-party intermediary. Going back to first principles, let's rethink what blockchain really is. A simple explanation comes to mind—blockchain is essentially a P2P network.
In fact, what we call "on-chain" is actually a consensus layer built on top of the P2P network. Many business processes do not need to rely on the consensus layer and can be directly resolved at the P2P network layer. For example, if Alice wants to pay Bob, the ideal way is for Alice to directly send the money to Bob in a peer-to-peer manner, without unnecessary intermediaries such as consensus validators or block producers. This way is not only faster but also naturally protects privacy.
At the same time, building applications on the P2P network layer can avoid performance bottlenecks and high transaction costs, making it possible to create truly useful and widely adopted applications.
P2P Economy: Leading the Renaissance of P2P#
We advocate for a P2P economy, where people can autonomously transact in a peer-to-peer manner. The role of the blockchain consensus layer here is to facilitate and coordinate the formation and settlement of transactions, rather than taking over their execution.
In this architecture, the P2P network and the consensus layer run in parallel. The P2P network serves as a marketplace for information exchange, where consumers and producers negotiate and exchange quotes. The consensus layer can provide smart contracts when necessary to ensure the smooth operation of the decentralized market.
The P2P economy can truly meet user needs and provide better solutions than traditional centralized services. Practical use cases include peer-to-peer payments, decentralized storage, decentralized computing, etc.
Let's take an example.
In a P2P computing network, Alice wants to outsource a computationally intensive task to Bob's computing cluster for a week. They reach an agreement in a peer-to-peer manner. As the provider, Bob offers computing services, and as the user, Alice pays stablecoins in a "streaming payment" manner based on the amount of computing resources consumed through a payment channel. If Bob fails to provide computing services, Alice can stop paying; if Alice fails to pay, Bob can stop providing services. The whole process is simple, protects privacy, and does not burden the blockchain consensus layer too much.
Decentralized services like BitTorrent have been popular on the Internet for many years, proving their effectiveness in meeting user needs and, to some extent, surpassing centralized services. The P2P economy can build on this foundation and enhance these distributed systems by combining them with stablecoin payments. We believe that in the next few years, infrastructure for peer-to-peer stablecoin payments, such as the Bitcoin Lightning Network and the CKB Fiber Network, will mature significantly and greatly promote the development of the P2P economy.
The P2P Economy Will Lead the Blockchain Renaissance#
The P2P economy opens up a new paradigm and provides a new development path for the blockchain industry. Compared to the current path dominated by Ethereum, the P2P economy has the following advantages:
- The P2P economy solves real-world problems and has real user needs and practical use cases (such as peer-to-peer payments, decentralized storage). These needs have been validated for many years and are not hypothetical. The P2P economy can truly create value, rather than simply providing speculative tools.
- In the P2P economy, most of the business logic does not need to be put on the chain, avoiding performance bottlenecks and transaction fee issues. As a result, the user experience is greatly improved, and large-scale applications are more likely to be realized.
- The P2P economy uses stablecoin payments, which are easy for users to understand and facilitate participants in evaluating service costs and benefits. Using stablecoins also reduces the speculative space for issuing coins.
In addition, the P2P economy will bring about a renaissance, helping the blockchain industry rediscover its original intention to change the world, specifically manifested in:
- Decentralized services: Many services can be re-implemented in a P2P decentralized manner, such as payments, storage, computing, and even VPN services. The P2P approach can provide a better user experience than existing centralized solutions.
- Equal payment: Peer-to-peer payments allow everyone to participate in transactions on an equal footing. There are no centralized financial institutions, no entry barriers, and no situations where large companies take advantage of small participants.
- Large-scale applications: P2P networks are more open and inclusive, better meeting user needs, and more likely to bring the masses into the blockchain for large-scale applications.
In summary, the P2P economy is expected to revive the long-neglected concept of P2P, give it new life, and inject new vitality into the blockchain industry, leading a new blockchain renaissance.